Todd Massedge

So you have this dilemma: Should you be focused on paying off debt? Or should you use the extra cash to invest?

The answer? It totally depends. Before you decide what to do, take advantages of these tricks:

Focus On Paying Off Debt With HHigh-InterestRates

“The bank wanted me to sell those customers that debt, because the system needs you to buy that new car, that holiday to Barbados, that latest iPhone or that new extension you’ve always been dreaming off. The banks are happy to let you do it with their high interest credit products, and they want me to be the guy that sells the idea to you. I was serving the machine that was enslaving me.” – K. A. Hill

Are you stuck with credit card debt that is hitting you with ridiculously hhigh-interestrates? Something along the lines of 20% or higher? This needs to be your priority. You should always be focused on paying off debt with the highest interest rates first, otherwise, those interest charges will just make things much, much worse. So if you have a credit card with an APR that looks like this:

Get rid of it! If you can’t pay it off right away, consider a free balance transfer to a new credit card that offers a temporary 0% APR deal. This can at least be a short-term solution to these pesky interest charges.

How To Pay Off Debt Without Actually Paying Off Debt

Sounds like a tongue twister right? For those of you with students loans, this one is for you.

Let’s say you have $100,000 in student loan debt by the time your repayment period starts after graduation (including any accrued interest). According to your loans, they have an interest rate of 12%, and you have elected to pay them off over 15 years. By the time all debt principal and interest is paid, you’ll have paid $216,000 in total, including $116,000 in interest payments.

That’s brutal.

Now you being the financially astute person you are, decide you want to refinance those loans right away. Using another provider like Sofi, let’s say you are able to refinance all your loans at 6% instead. That’s a pretty big difference! Now all of a sudden the total amount you’ll pay drops to $152,000 and your total interest paid drops to $52,000 over the life of the loans.

Essentially, you’re removing $64,000 of extra debt obligations you would have had to pay because of the interest. Moral of the story? If you’ve got student loans with hhigh-interestrates and have the ability to refinance them (aka having a job), you need to finance those ASAP.

Don’t Pay Off Your Mortage Faster Than You Need To

Most people would say you should focus on paying off that pesky mortgage debt. On the other hand, I say no way! Some may totally disagree with what I’m saying, but here’s why I believe I am right.

Let’s say you have a 30-year, $100,000 mortgage at 3.5%. Your monthly payment will come out to about $449. Over 30 years, you would have paid approximately $162,000 in total.

Now, what if you want to pay off that mortgage in 25 years? That would require you to pay $51.62 extra a month over those 25 years. But you’ll save approximately $11,500 in interest payments!

Thinking a little smarter now, what if you paid off your mortgage at a normal rate over 30 years, and invested that $51.62 extra principal payment instead? Let’s say at the end of the year you take those saved extra payments ($51.62 * 12 months = $619) and invested it in stocks or bonds at the end of each year. It wouldn’t be too hard to find some relatively safe bonds or stocks that would earn 5% year. Over a long time period, you’re bound to do well like the famous investor Ben Graham once said:

“In the short run, the market is a voting machine. But in the long run, it is a weighing machine.” – Ben Graham

If you chose to invest that money instead, you’d end up with $41,000 by the time you pay your mortgage off. Big difference, huh?

Conclusion

It’s simple. At the end of the day, your decision making for paying off debt should revolve around what makes the highest return, and what you are paying the highest interest rate on. Before you even consider investing in something like stock, or even cryptocurrencies (is bitcoin safe?), make sure you have all your high-interest debt paid off, emergency savings in place and can consider yourself to be financially stable. Doing these things will assist you in being able to get the most out of your money.

There’s been a lot of chatter about Bitcoin, Ethereum, and other cryptocurrencies recently.

Why?

Many are calling them the currencies of the future. Yet, they are often pretty confusing topics for people just learning about the space. So is Bitcoin safe enough to invest some of your savings into? Should you buy cryptocurrency? What’s the difference between Bitcoin, Ethereum, and blockchain? Let’s get started.

1. What Is Blockchain?

Bitcoin. Ethereum. Blockchain. Probably three of the biggest buzzwords over the past year.

So what are they and what are the key differences?

Let’s start with blockchain. Blockchain technology is what has been driving the popularity of cryptocurrencies like Bitcoin and Ethereum. Blockchain isn’t is not a cryptocurrency. It’s just the underlying technology behind cryptocurrencies. Don’t confuse the two! Blockchain technology has been extremely popular thanks to its decentralized natural, whereas our current financial system uses a centralized platform with the banks being the third party verifiers.

Think about it like this:

Let’s say you want to send money to your friend from your bank account. You tell your bank “please send money to account X”. Your bank gets the requests, verifies you have money in your account, and sends the money to your friend. Now here’s how it would work if we used a cryptocurrency like bitcoin. Let’s say you want to send your friend one bitcoin. Blockchain technology is based on a peer-to-peer concept. No third-party, like a bank, is required. So you load up your bitcoin wallet (maybe one like Coinbase), ask your friend for his wallet id, send the bitcoin, and poof! You’re done.

Blockchain is like a ledger: every transaction is added permanently to the ledger and cannot be tampered with.

But this is what happens on the backend:

When you are sending bitcoin to a friend, it first starts as an unverified transaction that is sent to ‘nodes’ throughout the bitcoin network

The bitcoin miners job is to bundle all unverified transaction into a ‘block’

In order to verify a transaction, certain conditions must be met. Essentially, their job is to make sure the transaction is legitimate.

Once it’s verified, the miner gets what’s called a ‘block reward’ or some bitcoin for their work. This is also known as ‘proof of work’.

To sum it up, blockchain technology is much more efficient, transparent, and secure

2. What Is The Difference Between Bitcoin And Ethereum?

By now you should have a decent understanding of how blockchain relates to Bitcoin and Ethereum.

Let’s say you have an insurance policy that only pays out if a certain ‘event’ occurs. Using Ethereum, a Smart Contract can be programmed to verify that the ‘event’ occurred using the nodes on the Etherum network and then pay out once verified. Because of its ability to utilize Smart Contracts, Ethereum is often the cryptocurrency of choice for new cryptocurrencies to run off on. For example, that’s why you will often be asked in Initial Coin Offerings, or ICOs, to invest via Ethereum.

3. Is Bitcoin Safe?

Many of you may be wondering, is bitcoin safe?

In terms of transactions, absolutely. If you have a secure bitcoin wallet in place, it can be a very, very secure form of transaction. But is bitcoin safe to invest in?

Only time will tell, but always be on the lookout for bitcoin scams. Like many other new technologies, you’ll have critics claiming there’s a ‘bubble’ and others claiming it will change the world.

Here’s what we know so far:

Bitcoin is starting to be more heavily adopted, with more and more options popping out that allows you pay in Bitcoin

Goldman Sachs has been a big buyer of Bitcoin. It’s unclear whether this is because they believe in Bitcoin or are only doing it as a hedge against cryptocurrencies replacing many functions of the bank.

So is bitcoin safe to invest some of your savings in? Maybe a small, small amount. This is probably one of those scenarios where it will either be worth nothing or exponentially more in 10 to 20 years.

4. Should You Buy Cryptocurrency?

Because of the decentralized, transparent, and efficient nature of cryptocurrencies, it’s likely they play a bigger part of global transactions in the years to come.

The benefits of blockchain technology are obvious. The question is: which cryptocurrency should you buy? Which reigns supreme in the long run? With so many ICOs every day and hundreds of new cryptocurrencies being created, is there one best cryptocurrency to buy?

With so many ICOs every day and hundreds of new cryptocurrencies being created, is there one best cryptocurrency to buy? That will be a much harder question to answer.

At the end of the day, just like you would want to learn how to research a stock, you’re going to want to spend some time learning to research each cryptocurrency. It will probably be safer to diversify with a basket of cryptocurrencies to invest in the growth of blockchain technology.

As always, manage your risk carefully, and never invest what you can’t afford to lose.